Consolidating Invoice and Expense Management Processes
Stephanie Dula 18 Sep 2015Though invoices are submitted by external suppliers and expense reports are from internal employees, the invoice and expense management processes within the accounts payable department share a lot of commonalities – whether it is the way they are received into AP, the manner in which they are routed for review and approval or finally settled.
Defining Invoice and Expense Management Processes
Invoice management includes the following processes – invoice receipt from suppliers, sorting invoices based on various parameters, matching purchase order (PO)-based invoices, routing and approval of non PO-based invoices, exception management and discrepancy resolution.
Expense management includes both travel and entertainment (T&E) expenses and other employee business expenses like magazine subscriptions, office supplies, etc. Employee expense processing involves employees purchasing goods or services and then submitting reports and receipts detailing their expenses, managers reviewing and approving the expenses and the AP department coding and reimbursing the expenses. T&E expenses have additional steps such as travel booking, entertainment expenses, mileage, per diems etc.
Common Challenges of Invoice and Expense Management
When the two processes share so many similarities, it is not surprising that manual and labor intensive invoice and expense management processes are plagued by some of the same challenges. One of the biggest hassle facing AP departments is an over-reliance on people and paper-based processes (see Figure 1).
Other challenges include:
- Lengthy processing and approval cycles;
- High cost of processing invoices or expense reports;
- Potential for unintentional waste and intentional fraud;
- Lack of real-time visibility across the transaction lifecycle;
- Manual data entry, further leading to errors and exceptions;
- Inability to enforce compliance with corporate policies;
- Adverse effect on employee/supplier relations and satisfaction;
- Limited ability to consolidate spend and negotiate discounts;
- Penalties for late or missed payments to suppliers;
Relationship between Automation and Processing Costs
One of the first benefits claimed by any AP automation solution provider is lower processing costs. Is it really true? Is there a direct relationship between automation and reduced costs?
PayStream’s 2015 Travel & Expense Management survey revealed that the average cost to process a single expense report with manual processing had increased to $26.63. What was interesting to note was the relation between processing costs and the extent of T&E automation an organization had in place. It is obvious from Table 1 that automation drives down expense processing costs significantly.
The relationship between processing costs and technology was also validated by PayStream’s Invoice Workflow Automation survey. According to our research, the average cost to process an invoice (from receipt to approval) was $15.00 for novice organizations. However, innovator organizations have been able to dramatically reduce costs down to $2.36 through the diligent use of automation (See Table 3).
Benefits of Leveraging an Integrated Solution
The benefits of automating the invoice management or expense management process are crystal clear – lower processing costs, increased processing efficiencies, accelerated approval cycles and improved supplier and employee relations, to name just a few. But organizations, particularly small and medium enterprises, can take the savings a step further by using a common integrated solution to manage supplier invoices, T&E expenses and other employee expense claims.
Benefits of integrating the automation of these processes include:
- Ability to leverage common workflows and business rules to process both invoices and expense reports.
- Ease of use for employees who now have to learn how to use a single system, whether it is for expenses or invoices.
- Fewer IT and support staff needed to manage a single system, compared to multiple systems.
- Increased compliance with negotiated contracts and corporate policies, greatly reducing maverick/ad hoc spending.
- Ability to consolidate spend across the entire organization to negotiate bulk discounts/ preferential pricing with suppliers.
- Greater transparency into and accountability for how the organization spends money, with real-time executive dashboards and proactive alerts and reports.
- Unified view into all of an organization’s non-payroll spend from a single platform in real-time.
